Monday, January 31, 2011

Retail landlords see more tenants, higher rents

(Crain's) — Long-suffering local retail landlords got a double dose of good news in the fourth quarter, as rents edged up and the vacancy rate fell as retail chains led by fast-food restaurants, discounters and grocers began ramping up their post-recession expansion efforts.


The vacancy rate fell for a third straight quarter, to 10.8%, after peaking in the first quarter of last year at 12.1%, according to a new report by CB Richard Ellis Inc.


Local asking rents, meanwhile, climbed in the fourth quarter to $15.30 from $14.83 in the third quarter — the first time Chicago-area retail rents fell below $15 in more than a decade, according to CB data.


“The average net asking rates are still much lower than they have been historically, but what this quarter-to-quarter increase shows us is a positive sign in terms of getting a little better traction in the market,” says Tim Brauer, a managing director with CB Richard Ellis who heads the local retail brokerage and land services groups. “We're on the right side of this.”


Mr. Brauer, who is transferring to CB's Bannockburn office from the west suburban Oak Brook office, says the big story of 2010 was discounters and food stores starting to refill some of the vacancies created when the recession claimed big chains such as Circuit City and Linens ‘n Things. Since retail development has all but halted, the market is moving toward equilibrium, and Mr. Brauer expects that trend to continue in 2011.
Some national statistics seem to portend good things for the retail market. On Friday, the Commerce Department reported that the nation's gross domestic product grew at an annual rate of 3.2% in the fourth quarter, up from 2.6% in the third quarter. Consumer spending fueled much of the gain, growing at an annual rate of 4.4%, the fastest pace in nearly five years.


“We're at a point where we're seeing improvement. How quickly that comes will be hard to say,” Mr. Brauer says. “I think there will still be some continued shakeup in the retail market.”
So far, the retail market's recovery has been uneven, with some chains growing while others are shrinking, a trend that's been playing out downtown in recent weeks.
Discount home furnishings chain HomeGoods, a unit of Marshalls and TJ Maxx parent TJX Cos., leased a 25,503-suare-foot space on the third floor of 600 N. Michigan Ave., snapping up the biggest vacancy on Chicago's Magnificent Mile.


On the street level of the Mag Mile, upscale watch retailer Tourneau LLC leased a 1,668-square-foot space just north at 636 N. Michgan Ave., with plans for a new Rolex store. Just a block south, shoemaker Kenneth Cole recently closed its store at 540 N. Michigan Ave., just about two years after subleasing about half of its space to another retailer.


Meanwhile, well-known women's fashion discounter Loehmann's on Saturday shuttered its local flagship store at 151 N. State St. The New York-based retailer, which is operating under Bankruptcy Court protection, says the two-level, 27,000-square-foot store was among six “underperforming” locations being shut down.
Fashion, evidently, is less in vogue than eating these days.


Grocery chains such as Aldi continue to expand, while Meijer Inc. has a deal in west suburban Berwyn for what would be its fourth new small-format store, largely focused on selling groceries rather than general merchandise like traditional Meijer stores.


Restaurants, particularly so-called fast-casual chains, also are becoming increasingly active. Five Guys Burgers & Fries, for instance, recently signed a 10-year lease for a new store in Hyde Park at 1454 E. 53rd St., a University of Chicago-owned property.


“In the fourth quarter of 2010, we really did see a pickup in the interest,” says Kelsey Blindt, an associate with HSA Commercial Real Estate, which represented the university in the lease.


Ms. Blindt says national chains like Five Guys have been scoping out the market the past couple years even as relatively few deals were inked. Now, she says, those chains are ready to strike and many landlords are generally willing to sign deals even at today's low rents.


“I think 2011 is the year for deals,” she says. “A lot of retailers are kind of realizing that now is the time to catch good values.”


Significant leases in the fourth quarter included:

  • Grand Rapids, Mich.-based Meijer signed a lease for 93,000 square feet at Cermak Plaza in Berwyn at 7175 W. Cermak Road. The new location, to be constructed on the site of a long-vacant Service Merchandise store, is expected to be open next year, according to Berwyn officials.
  • Omaha, Neb.-based Gordmans Stores Inc. entered the Chicago market with a lease for 47,500 square feet at Algonquin Commons, taking space formerly occupied by Wickes Furniture Co. The 565,000-square-foot lifestyle center at 1900 S. Randall Road in the northwest suburb is owned by Inland Real Estate Corp.
  • Gordmans also signed a lease for 50,000 square feet in a 191,684-square-foot shopping center at 2639 Aurora Ave., Naperville, taking space formerly occupied by Cub Foods. The center, which also includes a Macy's clearance furniture outlet, is owned by Australian mall owner Centro Properties Group.
Dick Barr of Goldtree Realty is a licensed Broker and has been an REO/Foreclosure specialist  in the Chicagoland area since 2004. In addition to specializing in foreclosures throughout the Chicagoland area, Dick has also purchased for investor clients properties all over the midwest, in cities such as Milwaukee, WI; South Bend, IN; Cincinnati, OH; Indianapolis, IN; Memphis, TN; Kansas City, MO and others.

If you would like more information about the foreclosure buying process, you may contact Dick at his office in Skokie, IL at 847-674-4445.  You can also visit him on the web at www.ForecloseChicago.com, or you can email him at DickBarr@ForecloseChicago.com.  Dick has a team of agents who are ready, willing and able to help you with your home buying or real estate investment needs.



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